Financial Times: Total tiptoes to Russia: “Quite simply, Total was envisaging a bid for its larger but troubled oil rival Shell. Last week, Mr Desmarest poured cold water on the idea, stating he was not interested in big acquisitions.”: “To qualify for membership of the club of super oil majors, an American dimension is even more necessary than a Russian one. There is an easy way to achieve this: merging with a debilitated Shell before it recovers or is taken over by another rival.” (ShellNews.net)

By Paul Betts

Published: September 24 2004

Total boss Thierry Desmarest is gaining a reputation as the oil industry's safest pair of hands. Yesterday it was the turn of ratings agency Standard & Poor's to wax lyrical about the world's fifth-largest oil group.

Affirming its AA long-term rating on the company's offer to buy a 25 per cent stake in Russia's Novatek, S&P praised the French group for its "massive and diversified hydrocarbon assets, a competitive cost structure, a conservative financial profile and policy, and significant financial flexibility".

Nonetheless, it also noted some weaknesses: the company's exposure to difficult downstream markets and petrochemicals and its lack of significant upstream operations in North America.

A few months ago speculation was rife that Mr Desmarest was addressing his American problem. Quite simply, Total was envisaging a bid for its larger but troubled oil rival Shell. Last week, Mr Desmarest poured cold water on the idea, stating he was not interested in big acquisitions.

Instead, he is cautiously dipping his toes into Russia to lock into the country's huge potential. The $1bn he proposes to spend is a spit in the ocean for Total. The move commands easy headlines but fails to resolve the American dilemma.

To qualify for membership of the club of super oil majors, an American dimension is even more necessary than a Russian one. There is an easy way to achieve this: merging with a debilitated Shell before it recovers or is taken over by another rival.